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Overestimation of social security payments reduces preferences for spending on social policy

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  • Zakharov, Alexei

Abstract

We test the fiscal illusion hypothesis, which concerns whether an awareness of the government’s costs and benefits is linked to preferences for redistribution and social policy. We conduct an N=2016 survey experiment in Russia—a country where many taxpayers are not aware of social security contributions that are paid by employers on their behalf. The treatment consists of a video with a calculation of the total amount of taxes and social security contributions that typically arise from an individual’s salary. We show that for individuals who initially overestimated these payments, information provision increases preferences for redistribution, while overall, the awareness of these payments reduces preferences for state spending, possibly due to reduced trust in the government and lower satisfaction with state-provided services. This is consistent with the explanation that new information about taxes and social security contributions signals a low state quality. These results persist in a follow-up survey given six weeks later.

Suggested Citation

  • Zakharov, Alexei, 2024. "Overestimation of social security payments reduces preferences for spending on social policy," European Journal of Political Economy, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:poleco:v:85:y:2024:i:c:s0176268024000594
    DOI: 10.1016/j.ejpoleco.2024.102557
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    More about this item

    Keywords

    Information provision; Preferences for redistribution; Survey experiment; Tax salience; Fiscal illusion;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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